Tax-Free Savings Account (TFSA)

A TFSA is so much more than a typical savings account. You can hold a mix of investments (including cash, GICsGuaranteed Investment Certificates and mutual funds), and, generally, any investment income you earn is tax-free. That means it’s 100% yours to keep.¹

With a TFSA, your deposits and investments grow quickly through tax-free investing¹. Generally, you pay no income tax on investment returns earned in the account, and there are no taxes on the amounts you withdraw.

See also Question 15, What kind of investments can I hold in a TFSA?^1

A TFSA account makes sense for just about everybody. Anyone who earns taxable interest in a simple bank savings account can turn it into tax-free interest with a TFSA savings account. Whether you’re saving for travel, home renovations, your children’s education or your own retirement, a TFSA is a good idea. Tip: You can also hold other types of investments in a TFSA.

A TFSA is especially well-suited if:

• You’ve maximized your Registered Retirement Savings Plan (RRSP) contributions and want additional room for tax-advantaged savings.
• You’re saving up for a big purchase and want to access tax-free savings before retirement. Unlike an RRSP, you can withdraw money from a TFSA in most cases without tax any consequences. (Note: If you have already maximized your TFSA contribution, you must wait until the following year before contributing anything more to your TFSA in order to avoid penalty charges from the Canada Revenue Agency (CRA).) (See "What happens if contribute more than my TFSA contribution room" below for more details)
• You’re worried that investment income could have a negative impact on government benefits or tax credits that are reduced or eliminated at higher income levels. These include Old Age Security (OAS) benefits, the Guaranteed Income Supplement (GIS) and the federal age credit. Withdrawals from a TFSA have no impact on eligibility for these “income-tested” benefits.

Great question – this chart breaks things down some of the differences between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP):

We’d love to meet with you and get you set up. Visit us at a branch or book an appointment to chat with a qualified BMO investment professional.

• Book an appointment
• Call us at 1-877 CALL BMO
• Visit your local BMO branch

You can also open an account online.

• have achieved the age of majority in your province or territory of residence (which is 19 in British Columbia, Newfoundland and Labrador, Nova Scotia, New Brunswick, Northwest Territories, Nunavut and Yukon, and 18 in all other Canadian provinces)²;
• be a Canadian resident; and
• have Canadian Social Insurance Number (SIN)

Then you’re ready to go. Book an appointment to get set up or open an account online.

No. Similar to other registered accounts, such as RRSPs, joint TFSAs are not allowed.

You sure can. You can open more than one TFSA, but the total contributions to all your TFSA accounts cannot be more than your total accumulated contribution room.

Ready to open a BMO TFSA? We’re ready to help. Make an appointment today.

A little background for you: TFSA contribution room accumulates each year in which you are at least 18 (at any time in the year), have a Canadian Social Insurance Number and are a resident of Canada. The TFSA contribution room for each year (since it began in 2009) is as follows:

For example: If you were 18 or older in 2009, your total eligible contribution room in a TFSA (as of 2026) would be $109,000²

The CRA will determine TFSA contribution room for each eligible individual who files an annual T1 individual income tax return. Your financial institution which holds the TFSA will report your contributions and withdrawals, so that CRA will be able to keep track of how much contribution room you have used and how much you have left.

The CRA will impose a tax of one per cent per month, for each month or part of a month that the excess contribution remains in the account. The one per cent tax will continue to apply until:

• the entire excess amount is withdrawn; or
• for eligible individuals, when the entire excess amount is absorbed by the addition of your unused TFSA contribution room for a later year.

Visit the CRA web site for more information on over-contributions.

Generally, you can withdraw any amount from your TFSA at any time, but this will depend on the type of investments held in your TFSA. For example, if you locked in a GIC rate for two years, you may have to wait until the end of your term to withdraw money.

Short answer: Yes, but maybe not right away.

Long answer: Any withdrawals (other than qualifying transfers) from your TFSA in a year will be added to your contribution room the following year. If you have contributed the maximum amount allowed to a TFSA and you withdraw any of your money, you must wait until the following year to contribute again—otherwise you will incur a tax penalty from the Canada Revenue Agency.

Example: In January 2022, Sophia opened her first TFSA and contributed the maximum of $81,500. In June 2022, she withdraws $7,000. The earliest Sophia can re-contribute the $7,000 without incurring a penalty is January 1, 2023.

Visit the CRA web site for more information on withdrawals and qualifying transfers.

Contributions to a TFSA are not deductible for tax purposes. Both earnings and withdrawals are tax-free and do not impact federal income-tested benefits.

No. Interest on money borrowed to invest in a TFSA is not deductible for tax purposes.

Unfortunately not. Only the TFSA account holder can contribute to his or her own account. However, you could give money to your spouse or common-law partner and he or she could then contribute that money to his or her own TFSA.

Withdrawals and income earned in the TFSA are not taxable to either you or your spouse or common-law partner regardless of whose money was used to make the contribution.¹

View our BMO Bank of Montreal TFSA Savings Account rates, or visit a branch to discuss our limited-time TFSA offers.

We do! They are:

An investment TFSA: In this TFSA, you can hold a mix of investments (including savings, market-linked GICsGuaranteed Investment Certificates, stocks, ETFsExchange Traded Funds and mutual funds), which can help you grow your savings. You can open this at a branch or by phone.

A basic savings TFSA: In this TFSA, you can hold cash in a savings account, and you can open this online.

There are no fees for contributions to a BMO TFSA. There is a $50.00 fee for transfers to another financial institution.

You sure can – and we can help.

You can transfer your TFSA at another financial institution to a BMO TFSA. Here’s how:

• Visit your local BMO branch to complete a transfer form (find a branch near you)
• We will then send the transfer form to the financial institution that currently holds your TFSA to ensure that the transfer does not impact your contribution limit. This is called a 'qualifying transfer.'

Please note the other financial institution may apply a fee for this transfer.

A TFSA is generally permitted to hold similar investments that a RRSP can hold. This includes cash, mutual funds, ETFs, stocks, GICs (including market-linked GICs) and bonds. We can help you think through the best option for you, and direct you to the appropriate BMO partner if you are looking for an investment option we cannot offer in the branch.

Think of it as a savings and investments 'bucket.' You can fill it with a mix of investments that align with your goals – whether it’s saving for a trip, renovating your home, or putting money away for a rainy day.

It really depends on your investment goals (are you saving for short-term, long-term, or both?) and your tolerance for risk. A TFSA should be part of an overall financial planning strategy that takes assets, liabilities, goals, income needs, risk and tax into consideration.

Sit down with us, and we can chat about the best investment mix for you. Book an appointment to learn more.